Last issue, we called on policy-makers to show some leadership on the climate change file, and put a fair price on carbon. On Feb. 19, British Columbia’s finance minister, Carole Taylor, did just that, bringing down a budget that included North America’s first-ever consumer-based carbon tax.
Starting July 1, B.C. will levy an extra tax on all carbon-emitting fuels consumed in the province. The rate starts at $10 a tonne, which works out to about 2.4¢ a litre at the pump, or 2.8¢ a litre for diesel and home heating oil. The rate will rise by $5 a tonne a year for the next four years, reaching $30 a tonne, or 7.2¢ a litre of gasoline, by 2012.
No one likes a new tax, but business groups, including the B.C. Chamber of Commerce, have cautiously endorsed it. Here’s why. It’s a flat tax on consumption: the more carbon you consume, the more it costs you. By attaching a price to carbon, the province is encouraging people to reduce their emissions. Yet by introducing the tax gradually, the government is also giving a four-year window for people to adjust to the new costs.
What’s more, unlike an income or payroll tax, a carbon-usage tax likely won’t have a regressive impact on growth or hiring. And, the government claims, it will be revenue-neutral. B.C. has pledged to return every dollar raised to businesses and individuals, in the form of lower taxes and an annual “climate action credit.”
The B.C. government expects the tax to raise $1.8 billion over the next three years. As a result, the province on July 1 will reduce the general corporate income tax rate to 11%, from 12%. Small business will see their tax bill reduced to 3.5%, and personal income taxes will fall by 5% on the first $70,000 of income. The tax cuts amount to $1.45 billion; the remaining $395 million will be mailed out in $100 cheques to every adult in the province.
The policy is unlikely to actually reduce emissions, at least initially. But once the tax reaches $30 a tonne, some reckon it will reduce annual emissions by three million tonnes.
It is unfortunate that yet another province has decided to tackle climate change alone, rather than work at creating a Canada-wide consensus. But that’s to be expected in today’s political climate. With 11 years of dithering (and only tonnes of hot air to show for it), that one jurisdiction has finally shown leadership is worth acknowledging.